Money with a dash of Funny

Thursday, 21 May 2015

Mediclinic International

"This then translated through to basic normalised earnings per share of 408.2 cents, this is an increase of only 9 percent. I say only, the market is looking for more here, the stock is primed for higher earnings. The dividend increased 11 percent, 75.5 cents for the second half (31 in the first), not exactly a kings ransom, with a yield of less than one percent. Switzerland represents 53 percent of revenues, the Untied Arab Emirates 12, and the balance South Africa. From a profitability point of view, of group EBITDA, exactly half is Switzerland, 13 percent the UAE and the balance (37 percent) South Africa. You get a fair idea that this is pretty much a private hospitals group with roots here in South Africa, certainly the lions share comes from outside of South Africa."

To market, to market to buy a penny bun. The big news (not unexpected though) is that it seems unlikely that the FED will raise interest rates at their June meeting. The market is anticipating pricing September as the most likely time for the first interest rate increase since 2007. The expectation is for interest rates to stay below the 40 year average of 6%, for the foreseeable future. As long as inflation stays under control, in the case of the US and Europe the spectre of deflation hovers around, interest rates will stay low by historical standards. If your pension or income is linked to interest rates, that is not great news, if you are a business owner low interest rates makes it easier to expand and take advantage of new opportunities. The danger that low interest rates presents is that 'cheap money' does not get the respect that it deserves and flows into assets/projects that should not be funded.

Moving to the home front we have the MPC giving their interest rate decision this afternoon, the expectation is for rates to stay the same. Why? CPI data yesterday says that our inflation rate is sitting at 4.5% which is in the middle of the 3-6% target band, add to that our very dismal GDP growth rate. The only reason I can think of left in favour of a rate increase is that policy makers are uncomfortable with low interest rates, which isn't a good reason to be raising.

An interesting number that I stumbled upon is "Inflation Rate in South Africa averaged 9.37 percent from 1968 until 2015, reaching an all time high of 20.90 percent in January of 1986 and a record low of 0.20 percent in January of 2004." (Thank you Trading Economics). With such a high average inflation rate, you can see why there is a steady weakening of the Rand. If our inflation is on average higher than our trading partners, the Rand needs to depreciate to balance the prices. There is nothing wrong with having a higher inflation rate, the key point is having a stable inflation rate. If you are an investor, having a stable inflation rate allows you to plan your strategy. If you are a saver, remember that Fiat currencies are units of account and not storers of value, so don't keep your cash under the mattress.

I am not too sure that I understand the outrage around the pay per use, the etolls debate that rages on in Gauteng. The highways are pretty darn awesome, multiple lanes, they certainly ease the congestion. I cannot imagine a world without the highways, getting to and from work for me in a timeous manner is critical. Equally I am lucky enough to be able to afford paying for these luxuries, or are they luxuries? Is the maintenance of the roads and highways supposed to be collected via fuel levies? Surely that would be the very best collection methodology. Whilst you may, or may not use the highway, your goods and services certainly do. How does that fresh produce get to your grocery store? Using the backroads? No. That would snarl up traffic and create more pressure on the byways.

Public transport is exempt from paying, which is good. And public transport would then be further subsidised by the rate and tax payers. That is how it works in most places around the world, the city wants more people off the roads. Whether or not public transport is effective or not, whether or not it is perfect or not, that is another argument altogether. The infrastructure needs to be funded from somewhere.

The way I view it, it is simple. Citizens vote for the powers that be, the powers that be set the laws, citizens obey as they have entrusted the powers that be to set the laws. It can of course change, citizens can vote the powers that be out of office. Either at a city, provincial or national level, or a combination thereof. As a collective we voted in the incumbents, it is our duty to pay for the projects that the powers that be have embarked on. Simple, that is the way that I see it.

If we cannot pay back our bills, or struggle to pay back our bills, two things will happen. One, when there is another infrastructural project, bond investors will demand a higher yield in return for lending us the money, in other words the cost of money will become more expensive. Two, the demand from investors will be muted, it will become harder to raise money at a higher rate. Harder and costlier. Unless of course the citizens bear the brunt of the cost, that has a negative impact on the broader economy.

Here is what I think will happen, however. If there has been push back from civil society on the whole idea of having to pay for the roads, we will continue to see the same push back. Of course there will be some people scared of not being able to renew their licence, they will pay their etoll bill. The delivery method is crucial here. If your bill is connected to your physical address or PO Box, just remind me how the Post Office has been performing lately? We have no abundance of court space nor the resources to deal with all the potential court dates. I suspect that if someone shows up to pay their licence renewal and gets told that you must get your etolls in place, they will just leave and not renew. If they are fined by a traffic cop, they will file the fine in the same place, file 13 (the dustbin).

The best way to collect the money is at the pumps. There is no doubt about it. You cannot ask for a few litres less when the tank is filled up as you object to the payment methodology. The system is too expensive and would work in a society where all people were compliant. Unfortunately we are NOT compliant. Less than one-fifth of all traffic fines are paid. Why would people suddenly start complying at this late stage? This is, I think, a collective stand. People are saying, enough is enough. It does not solve the issue of where the money is going to come from however and how much more it is going to cost in the future.

Company corner

Aspen is selling more non-core assets, this time to Stride Entities in Australia: Divestment Of Portfolio Of Branded And Generic Products To Strides Entities. They are doing two transactions the first is a deal to sell 130 products for A$265 million, which contributed A$26 million in pre-tax profit. The second is the selling of 6 branded products for $92 million, which contributed $10 million in pre-tax profits. Given that these are non-core assets and they are being sold for what would appear good prices, I think it is a good move. These funds can be used to pay down debt or used to purchase other assets that Aspen feel they can get better growth and value out of. Remember that they are still trading under a cautionary because there is a possible baby formula deal in the pipe line, which could be huge and require the funds that they are freeing up. The management team have proved that they are solid and shrewd deal makers, we back them to know where the best returns can be made for shareholders.

Another one of our core holdings that had numbers this morning is Mediclinic, Summarised Audited Group Results For The Year Ended 31 March 2014. First things first, it is always necessary to interrogate why we would want to hold this business. In other words, what are the prospects for the business and by extension, you, the shareholder. Ultimately all we care about are the relative returns of the overall portfolio which is made up of different companies. What times frames do you give to a normal investment? I would think a minimum of five years. That is more than enough time for management to execute.

So what happened during the year for Mediclinic? The company managed a few things, they managed to raise 3.1 billion Rand, they bought 2 Swiss hospitals and one site in Dubai and one here in South Africa was commissioned, Mediclinic Midstream in Centurion. They managed to refinance their Swiss debt at more favourable terms. Total number of beds at the end of the current financial year will be 8 044, at the beginning of the prior year it was 7 614. Over 400 beds added during the course of 24 months, I guess that is pretty breakneck speed when talking about hospital beds. Revenues, up ten percent, were driven by an increase in bed days sold and the average income cost per bed. Patients admitted grew 2.3 percent whilst the average stay actually increased 2.1 percent.

This then translated through to basic normalised earnings per share of 408.2 cents, this is an increase of only 9 percent. I say only, the market is looking for more here, the stock is primed for higher earnings. The dividend increased 11 percent, 75.5 cents for the second half (31 in the first), not exactly a kings ransom, with a yield of less than one percent. Switzerland represents 53 percent of revenues, the Untied Arab Emirates 12, and the balance South Africa. From a profitability point of view, of group EBITDA, exactly half is Switzerland, 13 percent the UAE and the balance (37 percent) South Africa. You get a fair idea that this is pretty much a private hospitals group with roots here in South Africa, certainly the lions share comes from outside of South Africa.

The company is keeping pace with medical innovations, a da Vinci surgical robot. Huh? Check it out, absolutely fascinating and less invasive than before: Surgery Enabled by da Vinci. See how the robot can peel a grape. Any surgeons out there want to let me know how robotics improves your lives, please let us know. It is NOT cheap, costing around 2 million Dollars each. Any Cape Town folks visiting the Durbanville Mediclinic, let me know if you can ask to see it. For the time being, in terms of the reading that I am doing, the service cost each year is around 15 percent of the purchase price. Yowsers. And the average cost per procedure is more expensive, at least in the US. Of course if the industry does not start somewhere, we will never know whether or not this MUST be the direction that medical science moves.

Medical care is a very emotive issue, most particularly when it impacts on your life, or that of a relative close to you. I believe that capitalism can do a better job than governments any time, in any territory. I believe that many public health systems could be managed, even on a localised basis, by people with profit motives. At the end of the day the ship will be tighter. One thing that you do not skimp on is medical, your health. World class facilities operating in their respective environments backed by a strong shareholder (Remgro owns over 43 percent of the shares) will see the acquisitive nature remain at the forefront. The stock is certainly not cheap, the earnings are below what the market expected. Mediclinc's share price is down 5.5 percent, we view this as an opportunity to buy some more shares!

Things that we are reading

Uber are trying to stay ahead; I think self driving taxis will be the first place where most of us get exposed to self driving cars - Uber gutted Carnegie Mellon's top robotics lab to build self-driving cars

Where is the best place in the world to be earning minimum wage? - What is the minimum wage around the world?.

Buffett is no doubt very clever, this is how he puts the intellect to use. Reading, then a great deal more reading - Warren Buffett on How he Keeps up with Information

Home again, home again, jiggety-jig. Forex market and banks have been big news lately, triggered by the international investigation (Global banks admit guilt in forex probe, fined nearly $6 billion). I don't fully understand how a couple banks can manipulate a market as big and liquid as the currency market? The way I understand it is they colluded to not under-cut each other when it came to giving big clients the rates at which the banks would buy/sell currency. In any case the Rand is below 11.80 to the dollar at the moment; use the strength to add to offshore investments? The market is very slightly in the green with Aspen being up 1.5% on their news, Mediclinic down 6% and Tiger Brands down 2.7% on their respective numbers.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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Wednesday, 20 May 2015

Looking forward to look forward

"Pithy quotes attributed to him are common sense ones mostly, like "One hundred percent of a company's information reflects its past, while 100 percent of its value reflects its future." I like that. There are many stock market historians that suggest today feels like another era and X is probably going to happen next, on my analysis of the past. I disagree with that sort of historical era connecting, after all, how many smartphones did they sell in 1981, or 1954 or 1937. The answer is of course is zero."

To market, to market to buy a penny bun/fat pig. The Dow Jones Industrial average had an OK time of it, after all was said and done, closing at another record high. Not to be though for the broader market and the nerds of the NASDA; marginal losses on the overnight session. Energy and basic materials coming back sharply in the US session, locally it was exactly the same. Oil prices and metal prices slipped, it is becoming apparent that the supply side is still "just fine", if anything we are seeing a more supplied market. This could and should lead to lower prices, the broader commodities complex was sent nearly three and a half percent lower by "worried" investors. I guess throwing in the towel is a loosely used expression that may apply here. If the returns in a specific sector are likely to be of a lower quality in the coming years, relative to the market, then perhaps it is best to be invested elsewhere. The whole debate of can I do better in the short term is a very tricky one.

That is why I guess some legendary investors like Bill Miller tended to ignore businesses that had deep peaks and troughs in their respective business cycles. So mining, materials, energy and construction was a definite no-no. Miller was possibly one of the best through the 1990's. Pithy quotes attributed to him are common sense ones mostly, like "One hundred percent of a company's information reflects its past, while 100 percent of its value reflects its future." I like that. There are many stock market historians that suggest today feels like another era and X is probably going to happen next, on my analysis of the past. I disagree with that sort of historical era connecting, after all, how many smartphones did they sell in 1981, or 1954 or 1937. The answer is of course is zero. Oh, and for the record, Miller was an economist, disproving that old theory of, economists can't be great investors.

Wal-Mart stock sank to levels last seen in November last year, a sizeable revenue miss by the analyst community of around 1,5 billion Dollars. The company might have missed estimates, those estimates were set by the financial analysts, it was they who missed, not the other way around. The stock was beaten down 4.37 percent. It turns out that Americans now are savers, which makes sense. If many a market commentator and financial blogger, as well as mainstream media reporter have been lamenting the lack of wage growth on main street (i.e. the whole idea that middle income American workers have missed the recovery, their wages are stagnant on a relative basis) then it is not really a surprise that when times get a little better, the collective starts to provision better. Pay down debt, save a little more for a rainy day, perhaps I do not need all those things. It was groceries that took the biggest knock, sales were flat there, proving once again that eating (too much) is cheating. The outlook is also worse than anticipated, a big chunk taken out by minimum wage increases across the board.

On the local front the market cheered the Pioneer Food Group results for the second day in a row, the stock is up ten percent since this time last week. Yowsers. On the flip side of that is Vodacom, the stock closed another 2 percent lower yesterday. At 125 Rand (15 Rand lower than it is now) the company has a yield of 5.27 percent AFTER tax. Their growth prospects are not flat, we are experiencing a transitory phase through to the era when we will communicate more with one another, less so in the traditional way of "picking up the phone". That saying will have less and less meaning, FaceTime, Facebook, Skype and WhatsApp through groups, we will keep people more in the loop. And I am starting to also develop this minor obsession with Periscope, the fact that I have not used it effectively is weighing on me heavily. At 140 Rand, Vodacom has a yield of around 4.7 percent after tax, if the company expects middle single digit earnings and should continue to payout 90 percent of earnings, the yield forward post tax is closer to 5 percent. We obviously believe that MTN has better growth prospects however, more geographically diversified in higher growth countries, admittedly with lower spending consumers.

European markets took off yesterday, the ECB suggesting that they could do more, with ECB member Benoit Coeure suggesting that the current bond buying program could be met in May and June, making sure that the ECB did not fall below the target for their current program. That sent the Euro sharply lower, the sentiments of the French economist and one of the inside 6 of the ECB were echoed by France's Central Bank chief, Christian Noyer. Did they have lunch or dinner together on Monday? Yes/No, I want to know! The recent spike in bond yields has led to the comments from Coeure, he is marginally worried that the outcome will not be the desired one. I cannot see the might of any central bank against the market, other than the fact that they assume the same "power" that a headmaster does to their respective pupils. Wave a big stick and be present in your approach, do not use the stick, it is an act of weakness.

Weakness turning to strength however is the Japanese GDP growth number, the growth is the fastest in a year. Perhaps the relative currency stability has had something to do with that. Sales tax increases have squashed the recovery a number of times, you could argue that the recovery period has been over one quarter of a century, fits and starts and the Japanese economy is no different, external events take their toll. Some pretty awful internal ones, the notable earthquake in 2011 that struck Sendai, perhaps changing our views on the use of Nuclear energy forever. Time will tell whether or not that was the tipping point, more off the grid and closer to home usage of alternative energies. Perhaps Elon Musk and Tesla are just as "lucky" as they are good at what they manufacture. See this WSJ article: Japan's First-Quarter GDP Growth Is Fastest in a Year

Lastly, perhaps a storm in a teacup and rather just an extension of the global investigation into currency rigging by the larger banks, they have of course admitted fault and paid fines. As this Bloomberg article (Banks Face Scrutiny in First Rand-Rigging Probe Since 2002) points out, the Rand accounts for around 1.1 percent of global turnover in foreign exchange markets. I will be forced to eat my words should the authorities come up with concrete evidence suggesting that there was indeed collusion. At the end of the day, greed is a human trait that is given more power by the allure of fortune. We will see.

Company corner

Tiger Brands came out with their Unaudited Group Results and Dividend Declaration for the six months ended 31 March 2015 this morning, HEPS are flat, turnover is up 7% and the dividend is up 3%. They also had another ANNOUNCEMENT RELATING TO THE PROPOSED ACQUISITION BY OCEANA GROUP LIMITED OF DAYBROOK FISHERIES INCORPORATED. Daybrook are a US based fishery who supply fish meal and fish oil. A more detailed look tomorrow on the numbers.

Exxaro released a trading statement late yesterday afternoon, TRADING STATEMENT FOR THE SIX-MONTH PERIOD ENDING 30 JUNE 2015. Due to the weak iron ore price they are feeling the pain, we haven't reached the end of the period yet and they are certain that HEPS will be at least 20% lower. The share price has reflected the tougher conditions, with it being down 37% over the last year.

Thanks to the guys at Just One Lap for making this very interesting infographic comparing Tencent (Naspers) and Facebook - Infographic: Facebook vs. Tencent. The big difference between the two companies is that Facebook makes most of its money through advertising and they have more eye balls actively looking at their screens. Different business models but it still gives perspective.

Things that we are reading

I am starting to see more and more of these, admittedly much from the same source. Economics is as much a science as it is statistics. Perhaps someone will have a revision of GDP soon: Martin Feldstein on how GDP accounting underestimates growth and improvements in economic well-being. And perhaps this is closely linked to the Wal-Mart numbers, that is however groceries and not electronics.

Related, a reader pointed out the engineering in chickens, as per the message yesterday and related productivity gains means more for less: "I think you may find that there is RSA chicken meat exported weekly from RSA - or there used to be. Also a lot is used in processed meat products, possibly sometimes without the consumer knowing this. Nevertheless it remains the animal protein of choice because of its low cost. Also 45 years ago it took 70 days to grow a 4lb bird, using 8 lbs of chicken feed. Today it reaches the same weight in 35 days using half the amount of feed. So productivity has gone up 8 times - this is the answer for food for the growing world population. Better genetics, better housing, better diets, better management."

Healing quicker in old age, might not make us live longer but will definitely make our lives more comfortable - Giving 'young blood' to old mice helps broken bones heal more quickly

This is a really clever way of harnessing wind power, with the added benefit of costing half of current wind turbines. In my personal opinion they are also far better looking than the current wind turbines - This wind turbine generates power without blades

Elon Musk tweeted this article yesterday - Fossil fuels subsidised by $10m a minute, says IMF. The article does not make it very clear but the 'subsidies' spoken about are the indirect costs of using fossil fuels (costs that we don't pay upfront). The only way to 'remove' the subsidy would be to add a tax to fossil fuels for the theoretical cost to society for using the fossil fuel. I think that there is already a great push toward clean energy; the only way to get to clean energy is if you are wealthy. The wealthy will do the research, implement the technology until it is mass produced and cheap enough for developing economies. China may be a huge polluter now but I think it will only be a phase in their history and growth, as they get richer people will start demanding cleaner air and they will be able to pay up for the cleaner energy.

Another very interesting development thanks to technology - L'Oreal is 3D printing its own human skin to test cosmetics.

A follow on from yesterday - President Obama joins Twitter with @POTUS account, breaks fastest million follower count record. I have been on twitter for years and haven't broken a thousand yet, so breaking 1 000 000 in 5 hours is very impressive (admittedly I am not running the biggest economy in the world).

Home again, home again, jiggety-jig. The market is down around half a percent this morning. The dollar is on the up again with the R/$ at 11.95 and R/$ 12.00 on the cards. There is a strike at MTN this morning with MTN offering a 5% salary increase, 4% annual bonus and a guaranteed 13th cheque. Unions want 10% wage increase and a 16% bonus, it also seems that part of the reason for the strike is for the union to be recognised by MTN.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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Tuesday, 19 May 2015

Chickens for days

"I asked him, how many chickens do we eat a year in South Africa, reminding him of an Astral presentation I once read, which said we consumed over one billion birds a year. He answered that we slaughter 19 million birds here a week and import another 7 million, I guess that means that we consume that many a week too. There are 52 weeks a year, multiply that by 26 million and you get to 1.352 billion birds a year."

To market, to market to buy a fat pig. One of our readers suggested that I should be more mindful that our Muslim, Jewish, Xhosa and Vegetarian readers don't eat pork, for the sake of transparency, neither do I. He suggested that we start: "To market, to market to buy a plum bun". That could be a potential tongue twister, I have not read the book, nor have I tasted the British (Austrian?) culinary delight. We all eat vegetables and fruit, perhaps not carbs so much.

On the topic of eating, at the CNBC studios at the JSE yesterday, after my usual 12 midday slot on Power Lunch, I crossed paths with Chris Schutte, a very friendly man who happens to be the CEO of Astral Foods, the chicken and feed producer. I asked him, how many chickens do we eat a year in South Africa, reminding him of an Astral presentation I once read, which said we consumed over one billion birds a year. He answered that we slaughter 19 million birds here a week and import another 7 million, I guess that means that we consume that many a week too. There are 52 weeks a year, multiply that by 26 million and you get to 1.352 billion birds a year.

26 million birds a week, 54 million South Africans (StatsSa mid year estimate last year) is nearly half a chicken each consumed by every man, woman and child that lives within our border per week. Or roughly 25 birds per person, per annum. That is a whole lot of chicken. So, perhaps, based and armed with this information, we should be going to market to buy some thighs, wings and legs? Or perhaps the revised version of the 17th century one, two centuries later had absolute no mention of an oinker: To market, to market to buy a penny bun. Sounds more like it, a penny bun, which had a legislated size, believe it or not. We should change it to that, a penny bun, to a) be all inclusive (we like that here) and b) to observe the classics (we like that here too).

Locally Mr. Market ended at the top of the days trade, driven by a bounce in resource stocks, by the time the closing bell (figuratively rang) we had added 0.7 percent. Results galore, the one that possibly caught the market most by surprise (a positive surprise) was Netcare, the stock ended the day up 6.29 percent after all was said and done. They did not release a trading update, earnings came in just under the level required to be obliged to release one. In other words, if you are certain that earnings are likely to be 20 percent or more than the corresponding period, you have to let the market know about this. In this case, adjusted HEPS registered an increase of 19.6 percent. No wonder the market was surprised. We like the sector, we like the company, our preferred investment is Mediclinic. You cannot own everything I guess.

Over the seas and far away, the US markets, Wall Street closed at another record high. The broader market S&P 500 closed up one third of a percent, last at 2129.2. Paul was actually on Wall Street yesterday. True story. He is away for the week and will return next week. What is amazing about technology is that even whilst he is NOT here physically, we can chat. The only extraordinary thing is that when I woke up real early this morning, he was still awake and we were able to chat on WhatsApp. Thanks for making the world easier technology, thanks so much.

Barack Obama joined Twitter in a separate capacity last evening, as @POTUS, the President of the United States. He does have his own account, with a whopping 59.3 million followers. In what must count as the most epic conversation between two people, two very powerful people, ex president Bill Clinton asked a public question. Oh, and let us just point out that the account now has 1.5 million followers, in the blink of an eye. 3 tweets, 1.5 million users and an introduction: Hello, Twitter! It's Barack. Really! Six years in, they're finally giving me my own account. The Bill Clinton question first:

The reply was equally funny, implying that Bill Clinton might be, along with his wife, the only two people to serve as president and "first lady" ever in the history of the USA. Or at least the first, should some other couple achieve that. Remembering that @FLOTUS is the official account of the First Lady of the United States, which coincidentally has 1.9 million users. Bill Clinton might need 2 phones, if his wife becomes the next president, one for himself (and his 3.46 million followers) and one for @FLOTUS, which no doubt he can manage.

An epic exchange between two of the most powerful people in our generation, another reminder of how powerful the platform can be. Now .... if only the platform itself would become better. As we allude to below, Periscope could become something epic, it needs user adoption however. We may start experimenting with Periscope, do you know of any decent iPhone 6 tripods? That is the start of course, a stable view.

Company corner

You cannot keep a good man down. I had to laugh when I saw the Reuters headline: Icahn says "dramatically undervalued" Apple should trade at $240. This link above refers to the open letter to Tim Cook, the Chief Executive Officer of Apple Inc. I like the self back slapping, Carl Icahn is not short of confidence. He speaks about the company having heeded their advice: "We are pleased that Apple has directionally followed our advice and repurchased $80 billion of its shares (yielding the company's shareholders an excellent return), but the company's enormous net cash position continues to grow while the company's shares are still dramatically undervalued." Thanks Carl for that. Stop saying that you are not able to do something, rather adopt the mantra: "Icahn, like Carl". The stock closed up 1.1 percent on the day.

Yesterday Vodacom released their Annual results for the year ended 31 March 2015. The number that first catches your eye is the impact of the 50% decrease in the mobile termination rate (MTR). The MTR impact was R 2 billion in revenues and R 1.2 billion in EBITDA, it is not great to see these numbers but the impact has now been felt. Interconnect rates now account for less than 5% of revenues and even though MTR will continue to drop over the coming years, the drop will be nowhere as big as last years one.

Revenue grew 2.1% to R77.3 billion, EBITDA dropped 1.5% to R26.9 billion and the number that matters the most HEPS, dropped 4% to 860c. Their customer base is up 7.2% to 61.6 million, active data customers are up 15.9% which has translated into data revenues up 25%. In South Africa data traffic for the 4Q was up 48% compared to the same quarter last year, with the result that data now accounts for 29% of revenue.

Data is no doubt where the growth is going forward and will eat into the revenues and profits from voice. There is still huge room for growth though, the average amount of data used by smartphones in South Africa (which they have 9.3 million on their network) is only 342Mb. As speeds and coverage increases; as webpages become more data intensive; as the number of smartphones increase; as the middle class grows; so the average data consumption will continue to grow exponentially. To cope with the increased data consumption Vodacom spent R13.3 billion (17.2% of Revenue) on Capex last year, R8.6 billion which was in South Africa.

A frustrating point in the results is that the Neotel deal has been waiting approval for nearly a year. If it is approved, Vodacom is hoping to target the business community and they will get access to the Neotel spectrum which will make them the leaders in the South African data network.

A Vodacom discussion is never complete until you visit their dividend. Given their dividend policy to pay at least 90% of headline earnings, they are a solid dividend payer. They are paying a final dividend of 400c (down 7%) and a total dividend of 775c (down 6%). After dividend tax you will get 658c which at current prices puts the after tax yield at 4.7%. Given that Vodacom is expecting single figure growth going forward, you wont see a huge increase in the share price. If you are after a solid dividend flow in an established company, Vodacom is a good option.

Things that we are reading

This is kind of old, the trend is still in tact however, out with small phones and large tablets, perfect timing for Apple with the iPad mini and more importantly, the iPhone 6 (and plus): Flurry: Phablet Usage Grew 148 Percent in 2014.

TV is not quite on the way out, what is happening however is that people are watching a lot of "stuff" online. In their own time. And a whole lot quicker than you might have anticipated. I am guessing that the people that are most worried about this are the regulators, you cannot give a licence to everyone, they just need to know that when they broadcast, they should obey the laws: YouTube: The Power of the Global Everything Network. I am getting more and more excited about Periscope, the Twitter application. They need to integrate it into the existing app, somehow.

The market always finds a way to get things done - Venezuela's Hyperinflation Is Working Out Very Well for Mastercard

As the value of companies increase so does the lure of going public. This is one way that the market tries to stabilise the valuations of companies; as more and more cash goes into the stock market, valuations go up and more companies IPO, thus creating more 'homes' for the cash and keeps valuations in check (well thats the theory anyway) - Private equity firms are finally dumping the deals they did before the financial crisis

It is great to hear good things about the companies that you own - An ex-Facebook intern describes what it was like to meet billionaire CEO Mark Zuckerberg. The one line that stood out to me, because of the Zucks relatively young age; "It was intense because he just spews wisdom at you,"

You can have some fun; this a great way to get people to buy stuff they really really don't need? - Texting this phone number signs you up for 'Drunk Shopping,' a service that shows you weird things to buy every Saturday at 2am

Home again, home again, jiggety-jog. This part is right, or in fact, you can say "jiggety-jig" or "Home again, home again, market is done.". In our case, the modern era, markets never really close. They are always open. Asian markets are higher, we should start a whole lot better here, not so? The Greeks, they continue to search for a deal with their European sisters and brothers, we are only watchers in this, like everybody else of course.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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Monday, 18 May 2015

Woolies best served, Medium-upper

"What became apparent to me reading both presentations is that the David Jones outlets, the department stores, are going to start carrying more Group merchandise. A stronger focus on the in-house affordable luxury brands. The "stuff" in the middle between everyday casual wear and absolute luxury is the target market. The whole premise is that the more disposable funds middle income people have, the more likely they are likely to be attracted to something a little more luxurious. Woolies highlights this group as Medium-upper in the Country Road presentation."

To market, to market to buy a fat pig. We slipped from the best levels of the day on Friday, around midday all the way through to the close. The stronger Rand did not help the dual listed stocks, as we have discussed often enough, the Dollar is weaker, the Rand is not stronger. Of course the one translates to the other. The Dollar is weaker, understood? In the end the local market closed nearly one-third of a percent higher, resources down nearly one and a half percent dragged us off the best levels. Over the seas and far away markets closed in the green, other than the nerds of NASDAQ, marginally lower.

Another record close for the broader market on Wall Street, 2122.73 for the S&P 500 by the end. I guess for those that agonise over the absolute numbers, it is important to know where the level is. There are often days when I know exactly what happened, yet I could not tell you the level of the market within a few hundred points (the local market that is), I would tell you where the share prices closed of the specific companies that we own, I have a fairly good idea of that. However, in our world we do not have to know to the nearest cent where the share price of a specific company is. No, it is a company that happens to trade at a specific price, we should be so lucky that we can own some of it.

Greece. Well. They are still really running on fumes. It is like being a student trying to eke out the last litre of petrol, I recall a friend of mine at university running out of petrol frequently. He tried his level best to get the maximum out of his resources, sadly it was not to be, the "silver bullet" (a mid seventies Audi Passat) was seen in strange locations around Grahamstown. And that was when petrol was relatively cheap.

What is cheap is funding to the broader EU, if you are in a position to stick to the rules that is. Check this FT article out: Tsipras letter reveals precariousness of Greece's finances. Rather them than us. Just this morning our Finance Minister was on Bloomberg, they were asking Minister Nene about the energy crisis, the PIC is rumoured to be an investor in Eskom. I wonder what government employees feel about their pension money being sunk into the energy supplier? The more I have the conversation with the many people around, the more people tell me of their marginal and smaller moves off the grid in any way possible. Gas, solar, that is what we can do here in Gauteng, you have more wind down there at the coast.

Company corner

BHP Billiton, the share price that is, will trade around 7 percent lower at the get go today, if the Aussie market is anything to go by. An email to a client that asked the question last week (what will it be worth) saw me answer this way: Good question. The simple answer is that nobody knows. South32 represents 4 percent of BHP Billiton EBITDA. Work on somewhere between 5-7 percent of your current BHP Billiton value. In a way I am glad that I was close (phew), in a way I was hoping that the market response might be a little more favourable. You know, the whole idea that these manganese and silver assets could be worth more to somebody else. Anyhow, you will recall that we advised most clients to take the cash, this is a good opportunity to exit the assets that management and shareholders view to be non-core to BHP. As simple as that. If management and shareholders approved the entire demerger and recommended it, then we want to hold the rump of the business and not the smaller assets. Understood?

Apple HomeKit, what is it? It is basically your home connected everywhere at any time, i.e. reachable from your mobile phone. Let us say for instance that you go away for the weekend. You do not need the same power that you needed before, right? Less power to be used is a cost saving to you. You can visit the HomeKit developers page for now, that is available. Set your home into zones, connect all the devices, it is all part of the internet of things. Things being devices that we would not necessarily associate with having connectivity, more recently we accept that TV's, fridges, cars, all our lighting and central heating/cooling systems will be integrated into the phones/notebooks/tablets that already connect to the TV. One extra "thing" to remember, the Internet of Things has an acronym that I saw for the first time, memorise it, it is here: IoT.

The first devices to use the Apple HomeKit won't surprise you, locks (no more keys) and garages (no more remotes), equally alarm systems activated with your voice via Siri. This does not always apply here, in the harsher environment of North America, (your Cape Town winters), most of Europe, all of Asia north of Southern Japan, heating is more important. Remembering that most people who could help it, did not live in the tropics as a result of more diseases prevalent in those areas. Nowadays we have vaccines, humans are working hard to find ways to make malaria a thing of the past. That important note aside, the Apple HomeKit is a small step in delivering savings on energy bills and completely integrated houses. About that security ....... (dot dot dot) Release date? Sometime in June, although some are suggesting that there is a delay on the cards, perhaps that would be pushed out to August or September.

Woolworths released a strategic view and investor update of both David Jones and The Country Road Group on their website Friday, the actual presentation was the week prior. The Woolies share price has been moving northwards, getting close to raising its bat (a cricket term when a batter reaches a milestone, some like AB do it often in a single innings, fewer balls faced), 100 Rand has a nice ring to it.

What became apparent to me reading both presentations is that the David Jones outlets, the department stores, are going to start carrying more Group merchandise. A stronger focus on the in-house affordable luxury brands. The "stuff" in the middle between everyday casual wear and absolute luxury is the target market. The whole premise is that the more disposable funds middle income people have, the more likely they are likely to be attracted to something a little more luxurious. Woolies highlights this group as Medium-upper in the Country Road presentation. Those are the brands that we will become more familiar with as South African Woolies shoppers, Mimco, Witchery, Trenery and Country Road itself. More recently you may have noticed (ladies, help me out here) the activewear segment, a fast growing global theme. Activewear replacing casual wear as everyday attire. Darn, I should have known, just as I was embracing jeans again.

Mimco is new here in Msanzi, only a year old. Bags, accessories, soft luxury. Trenery looks to target the older affluent market, read into that richer and older people. I really think that this business is going to deliver on their aim, to become the best retailer in the Southern Hemisphere. In other news however, the split of the population by hemisphere is 88 percent Northern, the rest us lonely souls are down in the Southern Hemisphere. 7.3 billion people globally, 12 percent in the Southern Hemisphere, that equals 876 million people. I can live with that.

Things that we are reading

The life expectancy graph shows how far we have come in the last 200 years. "For 1800 (red line) you see that the countries on the left - India and also South Korea - have a life expectancy around 25. On the very right you see that in 1800 no country had a life expectancy above 40" - Everyone is better off - Life expectancy increased in all countries around the world.

We show you this stat probably every 6 months, as a Google, Facebook and Naspers shareholder it is important to remember the growth that these companies can still tap into. - Less Than 40 Percent of People Worldwide Have Ever Connected to the Internet. Over and above the tech companies, as more people have access to the internet there will be great shifts in how societies operate.

I thought of "Lord of the Rings" when I saw this article - Sweden is fighting to preserve Elfdalian, its historic, lost, forest language

I have seen more and more articles talking about the productivity lost from working long hours - Why successful people leave work early.

Take the underground. Not you, rather your goods. For real: Amazon trolleys take a ride on New York subway. Anyone who has used the underground knows what the article points out, it is far quicker than driving.

Home again, home again, jiggety-jog. A whole slew of results here today, Vodacom, Pioneer Food Group, Astral and Barloworld. Some decent, they all kind of point towards an iffy looking local economy. Quite.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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Friday, 15 May 2015

Brait's New Look

"Brait are back in the headlines with another massive dealBrait Acquisition Of A 90% Interest In New Look. They will pay GBP 780 million for a 90% stake, which they are buying from two private equity groups, the remaining 10% is held by management (great for incentives and aligning interests). At this mornings exchange rate that works out to R 14.55 billion, so not a small acquisition. It ranks as their second biggest investment after Steinhoff and R2.3 billion more than the recent deal Brait to acquire Virgin Active."

To market, to market to buy a fat pig. Where did that come from? The S&P 500 soared to an all time closing high last evening, lower than anticipated jobless claims and a very tame inflation report saw to that. The S&P closed at 2121.1, a percent better on the day, the nerds of Nasdaq were the big drivers there. It has been a strange time for equity markets, most of the real action happening in the fixed income markets, most specifically government bonds. I recall something from a few days ago when Mark Mobius (The Templeton chap) suggested that the internet had a lot to do with keeping a lid on inflation for longer, and that meant lower rates for longer. i.e. A new level which was lower than in the past. We sort of touched on it the other day, with that article that suggested that GDP does not take into account the astonishing surge in productivity as a result of technological innovation.

The stocks doing most of the heavy lifting were healthcare and technology. Those with less domestic exposure, the Dollar index peaked out above 100 mid March, since then it has been in steady decline, currently the Dollar index is at 93.41. What is it, the Dollar index? Reminder, it is the US Dollar measured against a basket of other currencies, the major ones globally. When the Bretton Woods system was thrown out, i.e. the US Dollar convertibility to gold was discarded as a good idea, a new idea was needed, hence the Dollar index. Since the advent of the Euro, it has become much easier. In other words, no French Franc, Italian Lira, German Mark, Spanish Peso, Dutch Guilder and so on. You get the picture. Mostly the basket is linked to the Euro, with a 57 odd percent weighting in that direction, nearly 14 to the Japanese Yen, 12 percent to the Pound Sterling, 9 percent to the Loonie (the Canadian currency), most of the balance being the Swiss Franc and the Swedish Krone.

The highest level was actually back in the mid 1980's when the Dollar index nearly reached 165. The lowest level was when commodity prices were steamrolling all penny pickers back in the first half of 2008, the Dollar index registered a low of 70 and some change. Currencies and their impact are something best left for determining relative strength of economies, or vice versa. Currencies are supposed to act as shock absorbers for global trade. A strong US Dollar reflects that it has had a better time of late, the economy has been stronger than their European counterparts. What has happened in the very short term however is that despite the Greek tragedy that is unfolding in front of our eyes, the rest of the European area is recovering and showing signs of putting in a base. That has supported the Euro in the short term. The US economy on the other hand has been showing the opposite over the last couple of months. Unstoppable for a while, and then the strong Dollar reigned things in.

So now every man and his dog is looking for companies with no US exposure and looking squarely at businesses with European and developing market influences. You know, the whole idea that you must either be following a strong Dollar or a weak Dollar. Never invest for what currency exposure a business is likely to incur in the short to medium term. Rather invest in businesses that geographically spread out and operate in quality mature or high growth markets. Most importantly, know that the citizens of that country want the service, want the product and continue to pay more for it. I am more interested in that, rather than worrying and getting anxious about the currency.

I know that here in South Africa it is one of the most talked about thing, where is the Rand trading to the Dollar, or Pound or Euro? And what it means, or what it is supposed to be a reflection of. The Rand is doing poorly as a result of the economy, look what x or y or z is doing. In truth, if you match the Dollar index over the "performance" of the Rand, you will see big similarities. The Dollar is the reserve currency of the world, and for the time being it will remain that way. Until it changes. I guess it will not. The Rand, the Rupee, the Rouble and the Real will for the most part, trade against what happens with the US Dollar.

Locally markets sold off, guess what, as a result of the stronger Rand. Less chance of a rate hike in the US as a result of benign inflation. That is not necessarily good for Rand hedge stocks, fabulous for the local inflation outlook. At the end of the session the local all share index was one third of a percent lower than where it had started the day.

Company corner

Aspen out with a very short announcement post market yesterday: "Shareholders are advised that Aspen is currently engaged in discussions regarding a possible acquisition of an infant nutritionals business." Seeing as the business is global in nature these days (see, currency volatility!), the company could be making this acquisition almost anywhere. Any guesses, Brazil perhaps? Or perhaps somewhere in Eastern Europe? South East Asia? And perhaps the existing business of one of the majors.

Brait are back in the headlines with another massive dealBrait Acquisition Of A 90% Interest In New Look. They will pay GBP 780 million for a 90% stake, which they are buying from two private equity groups, the remaining 10% is held by management (great for incentives and aligning interests). At this mornings exchange rate that works out to R 14.55 billion, so not a small acquisition. It ranks as their second biggest investment after Steinhoff and R2.3 billion more than the recent deal Brait to acquire Virgin Active.

I can't say that I have ever heard of New Look, but this one stat I think tells you everything you need to know, "approximately 43% of female adults and teenagers in the UK shopped at New Look at least once in 2014.". The market cap of New Look will be GBP 867 million and add to that GBP 1 billion in debt, which gives you an Enterprise value of GBP 1.9 billion. What do the earnings look like? At the end of 2014 they had EBITDA of GBP 211 million, which has been growing by double digits. They are then paying 9 times EV/EBITDA, which is fair given the high growth projections and the low interest rate environment.

Brait still have some cash left over from their sale of Pepkor to Steinhoff. Not enough though, so they will need some debt to do this transaction.

There was a Tiger Brands Limited - Trading Statement yesterday. The numbers are disappointing which were not helped by the weakening in the Nigerian Naira. "Headline earnings per share (HEPS) from continuing operations of 853 cents (2014: 856 cents) is in line with the previous period. Basic HEPS, which includes continuing and discontinued operations, of 853 cents (2014: 867 cents) is 2% lower than the same period last year." We will wait until next week to get a clearer view of the numbers, when the 6 month figures are released.

Things that we are reading

Remember yesterday when we were suggesting that the rest of Naspers was essentially for free? You were getting it for nothing? Flipkart stocking up on $550 million in fresh funds at $16 billion valuation. What has that got to do with Naspers? As you can see; a) Naspers is an investor here and b) as per the Naspers website Flipkart, Naspers owns 18.6 percent. If they maintain their investment stake in this round of funding, it is worth 35 billion Rand to Naspers. Makes you think.

I have seen more and more people questioning the idea of GDP measurement. Not my favourite source, yet one should and must read everything here: How GDP Metrics Distort Our View of the Economy. That paragraph makes you think: "For example, even if a ship - built at great expense - cruised without passengers, fished without success, or ferried without cargo; it nevertheless contributed to GDP. Profitable for investors or stranded in the sand; it added to GDP."

Following on from the Verizon buying Aol. comes a piece from Bloomberg: Why Did the CEO Buy That Company?

Harry Shearer quit after 26 seasons. He is not Alan Shearer's cousin finishing his days in the minor leagues. Rather, he was the voice of the rest of Springfield, the town where the Simpsons live. Rolling Stone has more: Excellent, Smithers: Harry Shearer's 10 Best 'Simpsons' Characters.

An interesting look at where locals and tourists take photos - Locals and Tourists. Ignoring the data implications, do the maps look a bit like art? Or is it just me?

This could be big for Netflix - Netflix is in talks to enter China's booming online video market

The thought that you can chat to someone anywhere in the world, who speaks just about any language, is very exciting - Skype Translator Preview Access Just Got Easier!. How many people would you be talking to though, who don't speak the same language as you?

Home again, home again, jiggety-jog. I am seeing a great deal of green around when I look at my markets page, the only red spot is resources.The Rand is below the R/$ 11.80 mark, which doesn't help resource companies who have their products priced in dollars. Brait are up just over a percent, which would indicate that the market thinks they paid the correct price for New Look.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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Thursday, 14 May 2015

High growth for high multiple

"Revenues were driven by an eye popping increase in their advertising business (online advertising business revenues increased 131 percent year on year), thanks to stronger mobile video sales. Still, the big daddy of them all, mobile gaming strong (revenues up 82 percent year on year) alongside the main part of the business, PC gaming."

To market, to market to buy a fat pig. Yesterday we had a number of data points come out across the globe, resulting in a very mixed market. The most relevant to us was the Tencent 1Q numbers which we will chat about below; Naspers finished solidly green.

A number with more global consequences was the US retail sales figure, which missed estimates. The estimates were for a month on month rise of 0.5% but the number came in flat, which is not a small miss. It has to be noted though that the number is very volatile will most likely be revised later down the road as more data comes in. What does weaker sales data mean though? The markets think that it means a FED rate hike won't happen this year anymore, the US economy isn't sufficiently strong enough to constitute an interest rate increase. The biggest impact from this was a weaker US Dollar, money that had flowed into the US expecting higher interest rates in the near term flowed out. Or more likely, currency traders who were buying the US dollar in anticipation of money inflows from a rate hike, these traders were selling their long dollar positions. The Rand is sitting at R/$ 11.85.

Another piece of data which was not good for resources is a Reuters poll which showed analysts expect the Iron ore price to continue to drop. BHP Billiton is currently down 1.9% in Australia and will be down here when the markets open at 9:00. Lower iron ore prices is not great for the companies that sell it or the countries that get taxes and employment from the mines, it is however better for everyone else. It means that us as humans can do more with the scarce resources that we have to work with. In hindsight we can probably say that iron ore above $100 a ton was too high, thanks to Indexmundi here is a 15 year graph of the iron ore price. Even at these 'depressed' levels, the price is still up 357%.

Time frames matter in determining our perspective and views on something. Given the life spans of these mines, the amount of capital and time taken to build them, a 15 year perspective wouldn't be too out of place. In any event, when markets adjust to the 'new normal' it is painful, change normally is.

Company corner

Mediclinic released a trading statement yesterday morning. This is ahead of their results release, which is expected to be on the 21st of May. That is not too far away, a week today, all will be revealed. There are some accounting issues that have not been dealt with immediately in the trading release. Normalised HEPS, which excludes one-off and exceptional items, is expected to be between 8 and 10 percent higher than the 375.8 cents at the same stage last year. Somewhere around 411 cents for the full year. Basic EPS however is expected to be as much as 521 cents. Basic headline earnings per share is expected to be around 485 cents worth of earnings. Why all the different numbers? It is enough to make you want to weep. The interpretation of all the numbers is found in the interim numbers, IAS 33 reveals a little more.

Huh? What is IAS 33? International Accounting Standard 33, Earnings per share. I think what is important to remember too, is that in as much as the Swiss National Bank removing the Euro peg has been good for Mediclinic (more Rand earnings from their Swiss operation), the debt in Rand terms (three quarters of it issued in Switzerland) would have grown too. The question is either for the CFO, Craig Tingle, or quite simply, you can know that this relates to the weighted average number of shares in issue.

According to an IFRS IAS 33 paper I found, this is the reason, (Paragraph 26) "The weighted average number of ordinary shares outstanding during the period and for all periods presented shall be adjusted for events, other than the conversion of potential ordinary shares, that have changed the number of ordinary shares outstanding without a corresponding change in resources."

I am glad that you are all familiar with paragraph 26 now of IAS 33. It is seemingly important. Not too worry, all will be revealed a week today, remembering that the company raised a significant amount of money back in June last year, the number of shares in issue increased. We explained what they did with the money, they issued another 41 million shares to raise 3.177 billion Rand. This will jog your memory: Two transactions in Switzerland, raising cash. More on the results this time next week. The stock price sold off, we used it as an opportunity to buy people more shares who were underweight.

Tencent released their first quarter numbers yesterday, after the Hong Kong market had closed for business. There is a Tencent ADR in New York (I was watching that too closely yesterday afternoon) and of course you get the sense that Naspers trades as a proxy for Tencent. Huh? Remember the old trust calculator? No, OK, there is no harm in doing the simple math again:

Take the Tencent market cap in Hong Kong, which right now is 1.50 trillion HKD. Naspers owns 33.85 percent of TenCent, that translates to 508 billion Hong Kong Dollars. One Hong Kong Dollar at the current exchange rate is around 1.53 Rand. So, quite simply, multiply 508 billion HKD by the prevailing rate and that equals 779.34 billion Rand. Naspers had a market capitalisation of 771 billion Rand at the close last evening, that included a sharp move higher of 3.6 percent during the day. Obviously the wind at their backs following these results. The difference between what the stake in Tencent is worth, relative to what the JSE buyers are willing to pay is minus 8 billion Rand.

That is apparently what all the rest is worth, negative. Thanks for that South Africa. No wonder people trade the "Naspers stub", the difference between the two, provided you have access to all the markets. Here are the Tencent results, to jump back to where we started: Tencent announces 2015 Q1 results. A 22 percent increase in revenue, a 20 percent increase in operating profits year on year. Basic EPS for the quarter was 0.741 Renminbi per share.

The stock however trades in Hong Kong, represented in Hong Kong Dollars. The company also translates a lot of their numbers back to US Dollars, so you need to do a number of currency translations here. Diluted EPS was 0.733 Renminbi, convert both those numbers to Hong Kong Dollars and you get Basic EPS of 0.93 Hong Kong Dollars and Diluted EPS of 0.92 Hong Kong Dollars. The stock trades at 161 Hong Kong Dollars, as I write this.

Revenues were driven by an eye popping increase in their advertising business (online advertising business revenues increased 131 percent year on year), thanks to stronger mobile video sales. Still, the big daddy of them all, mobile gaming strong (revenues up 82 percent year on year) alongside the main part of the business, PC gaming. League of Legends you will be less familiar with over FIFA Online 3 (a variant of the EA one I guess), where people swap cards. In the outlook the company says: "Looking ahead, we aim to enrich our PC and mobile game portfolios in different genres and solidify our market leadership."

Tencent is an entertainment platform. Think about what passes for entertainment in China, online platforms are perfect ways of escaping the humdrum on "ordinary" life. State TV, State Radio, censored internet, that is the alternative. Heck, some movies don't make it past the censorship board, they are too saucy. I can think of a recent movie adaption of a bunch of poorly written yet exciting books that had to be sliced and diced. Escaping into a world where you have more control than normal, I can see the attraction of the platforms. More recently however there are other arms to the business, the number of subscribers in the chat business seems to have peaked, I guess it was bound to at some stage. The number of users on mobile networks, that continues to grow strongly. This is the shift to mobile, all businesses seem to be coping just fine.

We continue to recommend Naspers, remembering that you are effectively getting all the new (online retail) and older businesses (satellite TV) for basically nothing. This asset will continue to be the steer for the Naspers share price, I could think of a whole host of worse investments however to be in! Until the powers that be at Naspers decide that they will unlock value in a mother way for shareholders, you should not get that anxious about the Tencent share price, the multiple is unwinding as predicted (at above 40 times earnings it is still expensive however), the growth rates are still there. There are new and exciting businesses, Tencent spends a large sum on R&D and allocates many resources to their future.

Things that we are reading

The impact that driverless cars will have is huge for society - Autonomous cars will destroy millions of jobs and reshape the economy by 2025. Less accidents (money saved), more efficient (money saved) and probably a move to not owning your own car (less traffic, time saved).

Buffett and Gates are two people who have had a substantial impact on society and are both very clever - Warren Buffett tells Bill Gates why he's such an optimist.Take 2 minutes to watch the video."put 3 of me end-to-end and you're back before the Declaration of Independence was written. That progress, in 3 lifetimes like mine, is mind-blowing."

I wasn't sure if to believe this or not, here is a picture of what the India/ Bangladesh boarder looks like: Wikipedia confirms that it is true - Dahala Khagrabari. How do you think boarder controll works?

Home again, home again, jiggety-jog. That market is down this morning, Naspers is up a further 1.5% today and Kumba is down 4.5% on the lower iron ore price. The big data for today is the initial jobless claims out of the US.

Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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